External Audit: Annual Audit Letter

Transcription

1 INFRASTRUCTURE, GOVERNMENT AND HEALTHCARE External Audit: Annual Audit Letter Wrightington, Wigan and Leigh NHS Trust 28 September 2006 AUDIT

2 Content The contacts at KPMG in connection with this report are: Trevor Rees Partner KPMG LLP Tel: Fax: Jillian Burrows Senior Manager KPMG LLP Tel: Fax: Purpose of this letter Key issues arising from use of resources work Key issues arising from the audit of the accounts Appendices 1. Key performance improvement themes 2. Reports issued in relation to the audit Page Katie Elviss Assistant Manager KPMG LLP Tel: Fax: katie.elviss@kpmg.co.uk 1

3 Section One Purpose of this letter Purpose of this letter The purpose of this Annual Audit Letter (the letter) is to summarise the key issues arising from the work that we have carried out during at Wrightington, Wigan and Leigh NHS Trust. Although this letter is addressed to the directors of Wrightington, Wigan and Leigh NHS Trust ( you ), it is also intended to communicate those key issues to key external stakeholders, including members of the public. The letter will be published on the Audit Commission website at and on the Trust website at Responsibilities of the auditor and the Trust We have been appointed by the Audit Commission as your independent external auditor. The Audit Commission is the body responsible for supporting auditors to local public bodies in England, including NHS bodies. The Audit Commission has issued a document entitled Statement of Responsibilities of Auditors and Audited Bodies which is available from This summarises where the responsibilities of auditors begin and end and what is expected from you as the audited body. External auditors do not act as a substitute for the audited body s own responsibility for putting in place proper arrangements to ensure that public business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. The scope of our work The statutory responsibilities and powers of appointed auditors are set out in the Audit Commission Act Our main responsibility is to carry out an audit that meets the requirements of the Audit Commission s Code of Audit Practice (the Code). Under the Code we are required to review and report on: the use of resources - that is whether you have made proper arrangements for securing economy, efficiency and effectiveness ( value for money ) in your use of resources the accounts that is the financial statements and the Statement on Internal Control. This letter summarises the significant issues arising from both these areas of work and highlights the key areas we think you should address to improve performance in Appendix 1. The issues summarised in this letter have previously been reported to you and a list of all reports issued to you in relation to the audit is provided in Appendix 2. 2

4 Section Two Key issues arising from use of resources work The main elements of our use of resources work are: Auditor s Local Evaluation (ALE) - we are required to assess how well NHS bodies manage and use their financial resources by providing scored judgements on your arrangements in five specific areas. Value for money conclusion in part based on the ALE assessment above, we are required to issue a conclusion on whether we are satisfied that you have put in place proper arrangements for securing economy, efficiency and effectiveness in your use of resources. Specific risk based work - we perform specific local reviews based on a risk assessment of issues facing you. In , these reviews included a Finance Staffing Review, Recovery Plan Review and Core Financial Management Review, focusing on financial standing. We have also conducted watching briefs on the red and amber risks identified in our annual risk assessment. Work on behalf of the Healthcare Commission - we are sometimes asked to perform specific work on behalf of the Healthcare Commission, the body responsible for promoting improvement in quality within the NHS through performance assessment. In this work included Acute Hospitals portfolio phase 6 and a follow up of recommendations. The key findings from this work are summarised below. Element of work Auditors Local Evaluation Value for money conclusion Specific risk based work Key findings Our assessment of Wrightington, Wigan and Leigh NHS Trust against the five nationally specified areas resulted in the following scores on a scale of one (inadequate) to four (excellent). Financial reporting Financial management Financial standing Internal control Value for money Area Score 4 We have issued a separate report detailing our findings from the ALE assessment. The Trust is currently working on an action plan to improve the scores and we will follow this up as part of our planning for the 2006/2007 audit in February We issued an unqualified value for money conclusion for the year. This means that we are satisfied that you put in place proper arrangements for securing economy, efficiency and effectiveness in your use of resources We conducted a full review on three local risk areas: Finance Staffing Review We reported that the Trust currently has a traditional Finance Function that requires improvement and modernisation if it is to fulfil the needs of a forward looking Trust that is seeking Foundation Trust status. Recovery Plan Review We reported that although the Trust had a good understanding of its financial problem it needs to take all reasonable actions to ensure the Financial Recovery Plan is successful in its aims to reduce the overall cost base of the Trust and ensure that it can be classed financially as a going concern. Core Financial Management - Financial Standing The Trusts surplus position of 1.697m at the end of 2005/06 showed a major turnaround from the in year forecasts. The financial standing of the Trust still remains a risk for the future however a proactive approach is being taken to the management of this risk. The detailed findings of these three reports and recommendations have been reported to the Audit Committee separately. Further risk based work: New Funding Flows We have included this as a risk in our audit plan in both 2004/2005 and 2005/2006 and have planned to undertake the work outlined in the Audit Commission s red risk guide on Payments by results. Following detailed discussions with the Director of Finance, our planned in year work at has been postponed with a view to undertaking a more targeted piece of work, with specific focus on the risks the Trust faces from implementation of this regime. We have agreed that this work will be carried out in the 2006/07 financial year. The key findings from our watching brief work on the remaining red and amber risks focus on workforce contracts: Agenda for Change benefits realisation We have reviewed the Trust s progress so far in the implementation of Agenda for Change (A4C). All staff have been assimilated and the Trust is currently dealing with appeals from staff who are unsatisfied with their A4C banding

5 Section Two Key issues arising from use of resources work Specific risk based work Agenda for change benefits realisation (continued) Whilst ensuring compliance with national trajectories for implementation, the Trust has been clear that the immediate benefit is restricted to compliance with NHSE implementation targets. The lasting benefits of pay and service modernisation will only be realised in the long term and to this end, the Trust has documented its strategy Agenda for Change Benefits Realisation Plan. The immediate shirt term objectives relate to implementation whilst the realisation of benefits has been targeted over the medium to long term. We will maintain a watching brief over the implementation of the realisation plan during our 2006/2007 audit. We followed up areas for development reported in the data quality review, acute hospitals portfolio phase 5 and spot check review and reported these to the Audit Committee earlier in the year. Work on behalf of the We noted that there were still some recommendations to be addressed by the Trust. Healthcare Commission Our work included phase 6 of the Acute Hospitals portfolio. The work focused on the areas of Wherever we identified an area medicines to improve management, performance admission as a result management of this work, and diagnostic we communicated services. The this results to the of this Trust work as found a performance improvement observation. that generally A services summary are of managed the most well, important although performance some areas for improvements were raised, identified along in with the the Trust management s response, benchmarking has been provided exercise. at These Appendix recommendations 1. were reported at the July Audit Committee. 4

6 Section Three Key issues arising from the audit of the accounts Opinion We issued an unqualified opinion on your accounts on 7 July This means that we believe the accounts give a true and fair view of the financial affairs of Wrightington, Wigan and Leigh NHS Trust and of the income and expenditure recorded by the Trust during the year. Before we give our opinion on the accounts, we are required to report to your Audit Committee any significant matters arising from the audit. We did this on 6th July 2006 and the key issues are summarised here. Accounts production and adjustments to the accounts We received a complete set of draft accounts by the deadline set by the Department of Health which were supported by notably high quality working papers. We identified only minor presentational adjustments required to the accounts which you agreed to amend for. Financial Standing NHS Trusts are given financial targets every year. One of these, the breakeven duty, is statutory, which means you must achieve it. The others are administrative, which means you should achieve them. Your performance against the targets in is outlined below.. Target name In-year breakeven What it means Keeping expenditure payable for the year within the amount of income received for the year Your performance [/-] You reported a surplus of 1, 697k. Cumulative breakeven As above, over a three year period. You reported a cumulative surplus of 1, 212k Capital Resource Limit Keeping net capital expenditure within a limit set by the Strategic Health Authority You remained within the CRL of 4, 237k External Financing Limit Keeping the requirement for cash financing within a limit set by the Strategic Health Authority You remained within the EFL of 912k Better Payment Practice Code Paying at least 95% of creditors within 30 days of receiving an invoice from them You reported paying 97% of non- NHS and 95% of NHS creditors by value within 30 days. Financial Standing (continued) The Trust achieved the in year break even and cumulative break even targets over a three year period. Despite the healthy surplus reported in 2005/06, the Trust needs to seek significant underlying efficiencies going forward. A challenging cost improvement plan of 6.3m for 2006/07 has been agreed, though some of this target has yet to be identified and formalised into action plans. We will maintain a watching brief over the identification of cash releasing efficiency schemes (CRES) in year and achievement of this plan.. 5

7 Appendices Appendix 1: Key performance improvement themes This appendix summarises the main performance improvements that we have identified during the year, along with your response to them. The detail of the performance improvements have been communicated to you during the year. Performance Improvement Area Trust Management Response Journal Authorisation Staff should be reminded to authorise journals and adhere to the scheme of delegation. Fixed Asset Additions Budget holders should be reminded to use the standard AR1 forms to notify the Asset Register Manager of additions. Fixed asset equipment additions should not be included on the asset register without a standard, authorised AR form. Budgetary Control As best practice it is recommended that all monthly/bimonthly meetings with budget holders to discuss budget variances should be minuted, along with any action plans discussed within these sessions. Amendments to Payroll The Trust should remind the personnel team to ensure that all amendment forms, including Powertech employees are signed by the employee, whom the change relates to Staff will be reminded about the procedure of ensuring all journals are appropriately authorised. The Financial Accountant will write to General Managers asking them to remind managers of the need to complete AR1 forms and return them promptly to the Finance Department on delivery of capital equipment purchases. A procedure note has been introduced to ensure all variances above a specified level are reported to the monthly Budget Meeting and if necessary to Board. This can be supplemented with minutes being taken at each formal budget meeting. Copies of all minutes are filed with the Head of Management Accounts. The Trust will amend its procedures to ensure all Powertech forms are signed by the employee. Debtors It is recommended that debtors accounts on Spectrum or Compucare, including invoices for CAT 11 fees, can only be raised using the standard debtors request forms. IT issues The Microsoft Windows NT operating system software is installed on the server hosting the Pharmacy information and stock control system. This software is no longer supported by Microsoft. The Trust does not have an audit trail in place for minor changes and changes to IT system configurations within the IT department. It was noted that access to the server room for computer equipment and network printer is restricted to IT staff, however a log book has not been established to record the details of visits by non-trust staff (e.g. third party contractors). Recovery Plan The Trust should identify contingency plans for alternative savings in the event that they cannot influence national developments in areas where they have targeted savings. Project plans should be completed without delay and formally reported to the Project Board The Trust should incorporate its intentions and opportunities arising from the land sale receipt into the Financial Recovery Plan. The Trust should consider ways to encourage greater understanding and acceptance of financial responsibilities. All CIP schemes should be assigned to a responsible officer All identified service re-design schemes should be subject to financial and risk assessment. The Debtors Manager will arrange a visit to the RAEI site and report findings on the use of Debtor Request Forms in relation to CAT 11 fees to the private patient officer. The operating system has been ported to a Microsoft windows 2000 server, which is fully supported and complies with Microsoft security recommendations The Trust is working to implement standards in line with I.TI.L providing a framework of good practice, including robust change control processes. The finance department will work with the IT Department to establish change control procedures as recommended The Trust is currently looking to reconfigure accommodation in Buckingham Row and will take these risks into consideration. Responsible Team: IT 6

8 Appendices Appendix 1: Key performance improvement themes (Continued) Performance Improvement Area Trust Management Response Finance Staffing The Trust has a traditional Finance Function that requires improvement and modernisation if it is to fulfil the needs of a forward looking Trust that is seeking Foundation Trust status. It was recommended that the KPMG proposed organisational structure be implemented; the issues not addressed by the proposed organisational structure considered by the DOF and the Executive team; and work commences to estimate the efficiency gains to be achieved via eprocurement and the successful implementation of the Electronic Staff Record. Core Financial Management Financial Standing The Trust should ensure that its financial monitoring procedures allow for financial forecasting to be as accurate as possible. Service level agreements with commissioners need to agreed and signed at the start of the financial year. The Trust needs to take immediate action to ensure that there are plans in place to achieve all of the CIP target, 6.3m, in 2006/2007. Acute Hospitals Portfolio Admissions Management Develop an action plan for Admissions Management which addresses all of the issues identified in the standard reports Educate patients as to when they have passed through A&E and been admitted Reduce the length of surgical stays for the procedures reviewed to the best performing 25% of trusts Increase the number of patients admitted on the day of procedure for as many different procedures as clinically possible Work with the PCTs to increase intermediary provision within the local community Acute Hospitals Portfolio Medicines Management Develop an action plan for Medicines Management which addresses all of the issues identified in the standard reports Identify risks resulting from not having 24/7 cover by the Aseptic Unit and identify the resources required to increase the service Increase the levels of patient self-administration of drugs and full dispensing for discharge Increase the utilisation of shared care agreements Monitor the utilisation of non-medical independent prescribers Increase the usage of patients own medicines Acute Hospitals Portfolio Diagnostics Develop an action plan for Diagnostic Services which addresses all of the issues identified in the standard reports Reduce the turnaround times for Imaging reports Monitor success rates for Endoscopy Caecal intubation Review Out Of Hours arrangements for emergency endoscopies Increase the areas of clinical issues that are monitored and audited in Endoscopy Reduce the percentage of unused planned sessions in Endoscopy Reduce the ratio of blood units cross matched to units transferred A revised staffing structure has been implemented and the Trust is actively recruiting to the new posts. Responsible Team: Gill Harris and Karen Dawber Responsible Team: Chris Chandler, Ray Green, Gill Harris. Responsible Team: Sue Owen, Joan Carter, Allan Wilcox, 7

9 Appendices Appendix 2: Reports issued in relation to the audit Report Audit Plan Interim report and Auditor Local Evaluation (phase one) Audit Memorandum (to those charged with governance) Annual Audit Letter Recovery Plan Review Finance Staffing Review Acute Hospitals Portfolio (phase 6) Core Financial Management Financial Standing Date issued April 2005 May 2006 July 2006 September 2006 December 2005 May 2006 June 2006 September